The Federal Government’s Mid-Year Economic and Fiscal Outlook released this morning reveals the government will undertake revenue-raising measures which target small businesses to plug gaps in the federal budget.
Treasurer Wayne Swan said the government was on track to deliver a budget surplus of $1.1 billion in 2012-2013 even though “substantial downgrades to budget revenues” had occurred thanks to worsening global conditions which cut almost $22 billion from tax receipts.
This fall means the government has had to find $16.4 billion in savings and downgrade its original surplus of $1.5 billion.
“This has been necessary given the reduction in tax receipts and the need to fund the significant policy reforms announced since the 2011?12 budget,” Swan said.
Real GDP is forecast to grow at around trend at 3% in 2012-13 and 2013-14. This is a downgrade of quarter of a percentage point in 2012-13 compared to budget, but follows stronger than expected growth in 2011-12.
The unemployment rate is forecast to rise slightly from 5.25% to 5.5% in 2012-13 and 2013-14 and inflation is expected to increase in 2012?13 due to the one-off effect of introducing the carbon price, but remain within the Reserve Bank’s target band.
Swan outlined a range of measures to plug the holes in the budget, many of which will hit small business, including the provision of $390 million funding to the Australian Taxation Office.
The cash is for further compliance activities, specifically to “target profit shifting and high wealth individuals and to focus on outstanding income tax lodgements in the micro and small business segments” and is expected to increase cash receipts by $1.6 billion over four years.
The revised budget also includes the phased introduction of monthly pay-as-you-go instalments for large companies in Australia which is expected to raise $8.3 billion on an underlying cash basis over four years.
Companies with turnover of $1 billion or more will be required to pay on a monthly basis from 1 January 2014, companies with turnover of $100 million or more will have to pay up monthly from 1 January 2015 while companies with turnover of $20 million or more will start monthly payments on 1 January 2016.
The government estimates 10,500 businesses will be affected.
“[It is] better aligning tax payments with the way businesses pay GST and making payments closer to when the income is earned, like wage and salary earners,” Swan said.
In its budget update the government is removing the concessional fringe benefits tax treatment which allowed workers to salary sacrifice to buy goods and services sold by their companies.
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